Lisbon

Large transactions in core markets push volumes up 27% from Q1 2013; FY2013 volumes expected to be bettered in 2014

​​​JLL reports building momentum for retail real estate investment​ in Europe, after a solid start to the year, and following on from the strong volumes experienced in the second half of 2013. Direct investment in retail real estate​ for Q1 reached €6.6bn, up 27% from the Q1 2013 volume of €5.2bn, and 20% above the five year quarterly average.

Geographically, the majority of activity remains focused on the large, liquid markets of the UK and Germany, which together accounted for 63% of total volumes. The UK market remains buoyant with Q1 volumes of €2.3bn, 27% above the five-year quarterly average, while in Germany, several major deals boosted volumes to €1.8bn, 56% above the five-year quarterly average. Elsewhere, there has been a significant increase in activity in the recovery markets of Italy, Spain and Ireland, in addition to the Netherlands, which indicates the continuing broadening of investor appetite for geographical expansion.

Adrian Peachey, Head of Retail Capital Markets UK, commented:

“In the UK, we are seeing high levels of demand for Dominant Secondary to Super Prime. Lesser quality stock when packaged as a portfolio is also keenly sought after. We are experiencing an increasing number of new requests for investment opportunities in our market from a wide spectrum of overseas and domestic capital, reinforcing our view that the strong appetite for stock will be sustained for a considerable period.”

The quarter was characterised by several large transactions in the core markets. The largest of these was Unibail Rodamco’s purchase of a 50% stake in CentrO in Oberhausen, Germany, for €535m. In the UK, Intu Properties purchased a 50% stake in Westfield Merry Hill £407.7m (€492m) and 100% of Westfield Derby for (£390.3m (€471m). Meanwhile, in France, Fonciere Aspys is acquiring the Beaugrenelle Shopping Center in Paris for a price in the region of €700m*.

James Brown, Head of European Retail Research and Consulting, concluded: “The ‘mega deals’ that we are witnessing both in the UK and Europe, at keen yields, demonstrate the ongoing attractiveness of prime shopping centres to investors, and also reflect the strengthening demand from national, and particularly international retailers, for space within the best dominant, regional centres across Europe. Looking forward, given improved economic sentiment, a continued increase in the weight of capital and the broadening of investment targets both in terms of geography and typology of assets, we expect to see an increase in 2014 volumes on the €26.6bn in 2013. The potential dampener on this momentum remains the availability of prime stock, which may not keep up with this demand.”

* deal expected to complete in Q2 and has not been included in Q1 investment volumes